Why You Need to Include Blockchain in Supply Chain Logistics

Blockchain is more than a way to track cryptocurrency — supply chain managers can use this technology to make your future purchases more secure. The technology of blockchain in supply chain logistics can solve problems encountered in the modern movement of materials. Whether you’re a supply chain manager or not, it’s time to learn more about this technology that’s changing the future of logistics.

What Is the Supply Chain?

The supply chain is the order of things done to manufacture and distribute the goods you buy. It starts with raw material producers and ends with the stores where you make your purchases. Thanks to consumer demands, transparency in the supply chain has become more critical than ever. To ensure sustainability and the provenance of all materials in a product, tracking products through the supply chain is vital. That’s one area blockchain in supply chain logistics can help.

Think of the supply chain as an assembly line on a larger scale with each part added at a different location. Without oversight, it’s easy for parts to get lost along the way or for substandard processing to happen. In the past, direct communication and trust among members of the supply chain was the only thing to keep the system operating at its peak. Now, blockchain in supply chain logistics is changing how managers control products throughout the chain.

What Is Blockchain?

More often associated with Bitcoin and cryptocurrency, blockchain is more than trading currency. This technology is both transparent and secure. Each transaction recorded along the way, called a block, adds to the chain which is on multiple computers, called nodes. This creates many copies of the blockchain that all users can see. Everyone in the chain has the same ledger, or chain, so hiding transactions is more difficult.

Since everyone along the line as access to the same information, there is no middleman or central authority to verify the authenticity of transactions. Every node acts to check and verify the sales in the chain. This makes blockchain infinitely superior to previous verification and tracing models.

Traceability With Blockchain in Supply Chain Logistics

Supply chain logistics has not always allowed for tracing product materials all the way back to the original producers of raw goods. With consumers demanding specific labeling on country of origin or sustainable growing practices, traceability through the entire supply chain is required. This assures the origins and authenticity of products from the beginning to the end of the supply chain.

The authenticity of products improves the safety of supply chains and the integrity of brands in the chain. For instance, diamond brand DeBeers traces its diamonds with blockchain from the mine to the jewelry stores. This keeps undesirable blood diamonds from the supply, improving the customers’ trust of the brand.

Secure, Cheap Transactions With Blockchain

Blockchain includes an added level of security that other forms of ledgers in the past never did. Currently, companies have an average of 60 days of outstanding sales. These are goods they’ve yet to receive payment for despite already delivering them. With blockchain electronic ledgers, proof of delivery or receipt could immediately transfer funds. This would eliminate the need for the outdated paper method that leaves companies unpaid for weeks.

Smart contracts automatically vet new additions to the electronic ledger. If the new order satisfies the contractual requirements, it’s added to the chain. But it will be blocked if it fails to meet the parameters. Smart contracts are concurrently visible to all involved parties at the same time.

Real-Time Updates in Blockchain

Blockchain also eliminates the middlemen in shipping. The sender and the receiver would both know immediately when goods are delivered thanks to a block added to the blockchain. Smart contracts would preclude the need for paper bills or delivery slips and give the most updated, secure information available. With both parties seeing proof of delivery, lies about deliveries or lack of receipt would be impossible. This could avoid many legal and financial headaches.

With blockchain, the cost of transactions drops to zero. Compare that to the standard $5 to $7 per transaction with the antiquated electronic data interchange, EDI, method. Added to this is the cost of invoices, which can be around $10 each. The numbers add up quickly, especially for businesses that deal in multiple transactions across their supply chain. Blockchain costs nothing and creates real-time transactions.

How to Integrate Blockchain Into Your Supply Chain

There are numerous ways to bring blockchain to your company’s supply chain. Some businesses have in-company ledgers, but others open the ledgers to those along their supply chain. One company, Kuovola Innovation uses blockchain for smart tendering. RFID tags track goods after automatically awarding the shipment to the lowest bid. The entire transaction takes place painlessly for a supply chain manager. This is only one way to integrate blockchain into your business.

Blockchain works with many parties agreeing to its operation. You will have to convince those in your supply chain to embrace blockchain use. Until then, educate yourself on software and other technological updates your company may need to make to support the multi-entry ledgers of the blockchain.

The Future of Logistics

The future of supply chain logistics will depend on implementing real-time data. Tracing goods to their origins will also meet consumer demands while enhancing the safety and integrity of products. To achieve these goals, blockchain will become a vital part of any supply chain manager’s job. Don’t wait for tomorrow to incorporate blockchain today.

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Megan Ray Nichols is a freelance science writer and science enthusiast. Her favorite subjects include astronomy and the environment. Megan is also a regular contributor to The Naked Scientists, Thomas Insights, and Real Clear Science. When she isn't writing, Megan loves watching movies, hiking, and stargazing.